Should We Bail Out the U.S. Auto Industry?

[Lemur]

Well, should we? My instinct is to say "no," then turn around, spit, and shout, "Hell no!"

Does anybody want to make a cogent argument that we should?

[Strike For The South]

I will drive up there and dismantle the factories myself.

[PBI]

Care to give a link? I'm afraid this story hasn't made it to the UK.

[Lemur]

Care to give a link? I'm afraid this story hasn't made it to the UK.

Sorry, there's so much out there I had a hard time deciding on a single link to post.

Motley Fool: Why We Shouldn't Bail Out Detroit

AFP: Struggling U.S. Carmakers Say They Can't Wait for Obama Presidency

[LittleGrizzly]

Unsure on this.... edging towards CA's general position... the goverment must get something out of the money... and cleaner and effecient cars....

What if anything do you get from the $25 billion ?

or is it just a blank cheque with a note saying please don't fire anyone...

[ICantSpellDawg]

I don't know.

A failing economy is like the story "alive". Everybody was struggling with life and starvation. Because a few people died early on, the others were able to nourish themselves on the flesh of the dead and gain back some of their energy to tide them over until they were rescued.

Zombie Apocalypse

I own a crap load of GM shares. I hope Ford goes out of business so that GM can then feast on the corpses of their market share, assembly lines and, of course, their workers delicious corpses. In every industry we, deep down, hope for a nuclear holocaust to happen to the competition. If they would only die, we might live.

Then again, Ford people are saying the same thing about us and there is always the risk.

[Louis VI the Fat]

I own a crap load of GM stocks.

Yeah, me too. Got lots of them.

When you buy a sandwhich here they wrap 'em in paper made of GM stocks.

[Gregoshi]

I will drive up there and dismantle the factories myself.

In your Chevy pickup?

[Strike For The South]

In your Chevy pickup?

My F-150 which will be paid off here soon enough due to my diligence as stock boy. If I can do it so can they!

[Mangudai]

The auto companies deserve it more than AIG. But, we're probably throwing good money after bad. Think they will be profitable two years from now? I doubt it.

[seireikhaan]

*sigh

On the one hand, I'd really rather that a company fail who deserves to fail.

On the other hand, the economy can only take *so* many shocks, before all confidence in the markets completely dissolves. Either way, its a bad deal for America.

[Gregoshi]

My F-150 which will be paid off here soon enough due to my diligence as stock boy. If I can do it so can they!

My wife drives an F-150. Good for you on the payoff!

[CountArach]

Australia is going througha similar thing at the moment and we have decided to bail them out. I'm torn on this - there are a lot of jobs at stake, but on the other hand I loathe Corporate Welfare. I would not mind if there was a partial-nationalisation as part of the deal, that way the people get more out of it once this recession is over with. Also, doing something like what Obama is suggesting whereby the manufacturers have to produce cleaner, more efficient cars would be a great step. If those two things were met, I would support this. Until then it just seems like bailing out the wrong people.

@ PBI - http://www.nytimes.com/2008/11/11/us...er=rss&emc=rss

[drone]

Part of me says yes. The Chrysler bailout was actually profitable to the taxpayer back in the day, and the impact on employment should they fail would be huge. But this has been on the horizon for a while now, and I'm thinking Detroit deserves to burn. For years, they scratched, clawed, and lobbied against changes that would have made them more competitive today.

Had this been isolated or six months sooner), I would say yes. Everyone knew it was coming, and GM/Ford would have been better candidates in my mind for a bailout than AIG and the FMs (and the bailout is going superbly there ). I'm just don't think we (the taxpayers) can afford it now. But I'm sure our new overlords (and their union backers) will find a way. It's been a while since we've had a tariff war, let's fund the bailout with a 25% tax on foreign cars.

[Xiahou]

Should We Bail Out the U.S. Auto Industry?

No, absolutely not. They're already getting $25 billion as an incentive to make cars that they should've already been making to begin with, and now they want $75 billion more? Forget it.

Let them go bankrupt- that doesn't mean they'll go out of business, it means they'll have to restructure their business, renegotiate their contracts... basically figure out ways to be profitable that don't involve going to the federal government, hat in hand.

Of course, the "renegotiate their contracts" item is the exact reason why they will get a bailout. The Democrats owe the unions too much not to give them this. Yet another industry that we'll be told is "too big to fail".....

[Askthepizzaguy]

No, absolutely not. They're already getting $25 billion as an incentive to make cars that they should've already been making to begin with, and now they want $75 billion more? Forget it.

Let them go bankrupt- that doesn't mean they'll go out of business, it means they'll have to restructure their business, renegotiate their contracts... basically figure out ways to be profitable that don't involve going to the federal government, hat in hand.

Of course, the "renegotiate their contracts" item is the exact reason why they will get a bailout. The Democrats owe the unions too much not to give them this. Yet another industry that we'll be told is "too big to fail".....

I agree with Xiahou.

The bankruptcy might force the unions to renegotiate their contracts. Those unions are just as greedy as their corporate masters. The difference between American automaker's pay under a union and American worker's pay and benefits working at a nonunion company is staggering.

Sorry, but we can't afford it. I never once was part of a union, and some places, like Wal-mart, would tank if there were a worker's union. They can sell things cheaply because of the lack of a union. With a union, stuff at Wal-mart would cost as much as stuff from the convenience store, and that would further depress the economy as the working and middle classes would see their everyday expenses soar.

Automakers have a skilled, technical job that must be very challenging and tedious. As such, they deserve more than the minimum wage, and that's what the market says too. But the market says automakers cannot support insane wages and bloated extras, that's one of the reasons they can't sell a decent competitive car. And they are competing against other American workers who get paid less. The market has spoken, and it says they've taken too much from the pot and now they have to pay the piper.

If you were to bail them out, it would be criminal. Who would benefit? The stockholders, who have contributed nothing to this economy. Taxpayers would be bailing out stockholders, and when the company turns around, the stockholders would benefit, and the taxpayers would not. The companies would still be run by the same people persuing the same policies and the union contracts would continue, using taxpayer money.

If I went to the federal government and I asked for a raise, when I was a pizza delivery man, and they said yes, the federal government would be subsidizing an nonessential worker. Instead of lazy people getting up off their ass or grabbing a pizza on the way home from work, they use taxpayer dollars to fund a person who carries one small item miles and miles to a private home and back. For that money, we could have FREE TAXI SERVICE across the united states.

That's a metaphor for what we are about to do, and it's a blunder.

We bailout the failing auto industry and expect nothing in return, and what will happen? The industry will just fail once more and ask for more money. And we'll never get it back. And what else could we be spending the money on?

HOW ABOUT THE PEOPLE LOSING THIER HOMES ACROSS AMERICA? I'd rather bailout the families who are facing foreclosure, by paying the banks directly for their mortgages every six months, and in exchange, the federal government can own a percentage of their home, to be turned back into a liquid asset upon the home's eventual sale, which could end up turning a profit if home prices go up.

It's the same concept, socialism, but we get something for our trouble, and those who are behind or unemployed stay in their homes and don't go out on the streets, and don't suck up money from other welfare programs like food stamps, which if they were in an apartment they would need.

It's called investing in people who need temporary help. They would need to find a job, of course, and work towards regaining the entirety of their homes. But the big financial companies we just bailed out decided to reinvest the money and people are still losing their homes. Instead, we could just bailout the mortgage holders themselves, and they can pay the banks what they owe them, and owe the government a percentage of their home for every six months of mortgage bailout. The mortgage companies no longer have bad loans, the homeowners keep their houses, and the government and the taxpayer get compensation for their assistance.

Or you could take the auto bailout money and invest it in my college education, to be paid back with interest, after I graduate.

Or you could use it to cure cancer or feed hungry people in Africa. I don't care. Throwing money at the auto industry and expecting nothing in return is downright retarded.

[Crazed Rabbit]

Well, should we? My instinct is to say "no," then turn around, spit, and shout, "Hell no!"

Does anybody want to make a cogent argument that we should?

Exactly.

Every time we bail out one of these ******* the rest get the idea they'll be saved too.

The motley fool article you linked makes very good points why we definitely should not. Nationalization is stupid too, because then the government will be in charge of (and even more loath to change) the completely obsolete business model.

CR

[Seamus Fermanagh]

Why is this a question?

Michigan voted heavily for Obama, as did Pennsylvania and a good chunk of the old "rust belt."

In short, where labor unions still retain some strength of numbers, the Dems did very well.

The Dems will, shortly, have an easy majority in both halves of Congress and a Dem president.

The question is NOT should it, but will it happen this year or early next.

Tally up the cost and move on, this one's a done deal.



Of COURSE we shouldn't -- but its no longer up for evaluation.

[Strike For The South]

Why is this a question?

Michigan voted heavily for Obama, as did Pennsylvania and a good chunk of the old "rust belt."

In short, where labor unions still retain some strength of numbers, the Dems did very well.

The Dems will, shortly, have an easy majority in both halves of Congress and a Dem president.

The question is NOT should it, but will it happen this year or early next.

Tally up the cost and move on, this one's a done deal.

IM TO YOUNG TO HAVE ULCERS

[Lemur]

Tally up the cost and move on, this one's a done deal. Of COURSE we shouldn't -- but its no longer up for evaluation.

All is not lost, my friend.

The chairman of the Senate banking committee said on Thursday that he did not believe there would be enough Republican support for efforts to aid floundering automobile manufacturers, raising doubts about whether Congressional leaders will call the House into a lame-duck session next week.

“Right now, I don’t think there are the votes,” the chairman, Senator Christopher J. Dodd of Connecticut, said, adding that he personally was in favor of using money from the $700 billion financial rescue program to help General Motors, Ford and Chrysler. But Mr. Dodd said he did not believe such a bill would get through the Senate.

“I don’t know of a single Republican who’s willing to support,” Mr. Dodd said. “So I want to be careful about bringing up a proposition that might fail in light of the fact the authority exists, and under an Obama administration there seems to be a greater willingness to deal with the issue. So there are some political considerations to be made.”

And this, of course, is why we need for the Republican Party to not implode, and not wander off into a corner by becoming the White Christian Identity Party. We need those loveable wingnuts.

[Lemur]

Once again, The Onion has us all dead to rights.

[Ironside]

IMO there's three more or less valid different options.

Either hell no as Lemur so elequently put it. Most valid, as the market won't change and the companies will die later on anyway unless they change and feeding them goverment money won't change that. If they don't, then so be it, Sweden doesn't have a shipyard industry anymore for a reason.

It's also possible with nationalisation, if the intended goal is to force a change (or going with DA:s example). If successful then probably the best option, but probably the least certain option as the companies can fail anyway. Of course, this is the US so the odds for it to even be considered....

Or bail them out as you consider the loss of jobs to great atm (there's a chain effect that will ripple through the suppliers). Keeps the fired ones that can't get a new job quickly out of welfare. As this is supposed to somewhat valid option, that means to you do it and counts with it to be delaying the problem, that the companies will fail later on. Should they not, then you're happy that things turned out much better than expected. Hoping for something more is going into La-La-land.

[Divinus Arma]

Here is where you see how far left I have become in recent months. This is a letter I sent to Reid, Pelosi, Biden, Obama, My Congressperson and both Senators:

Dear *****,

Regarding the American Auto Industry, the Democratic Congress has an opportunity to solve a myriad of serious problems simultaneously. Among these are dependence on foreign sources of energy, lagging American share of the automobile market and an industry on the verge of failure with vast economic repercussions, and global warming.

There exists a straightforward solution which our government may seize upon to change the course of direction and reshape the national dialogue.

American automakers seek a government funded bailout. It is here proposed that this bailout be provided with the following condition: A consumer-use vehicle must be offered that virtually eliminates the need for gasoline. This vehicle must be initially affordable to more than 50% of all Americans.

Imagine our country leading the world in green technology, away from fossil fuels, and towards energy independence. Imagine an American auto industry reinvigorated, leading domestic and global sales.

But what will be the choice of fuel? As many as possible. A vehicle that may be recharged and/or refueled with as many options as possible allows for the market to determine which fuel is most cost-effective. Energy stations may replace gasoline stations, offering ethanol, quick charge hydrogen, or even compressed air (http://www.mdi.lu/english/produits.php).

This is an opportunity that can not be wasted. Please redirect our auto market and provide the capital to allow America to lead the world once again.

Respectfully Yours,

Bob Goldthwait, MBA

[HoreTore]

Absolutely not. The american auto industry is chrashing and burning for a reason, they produce inferior cars nobody wants. if you decide to give them money now, you'll just face the exact same situation in a few years.

The only way to turn things around is to produce better cars that people would want to buy. Like the cars Toyota, BMW, Mercedes, etc, are making.

If you do decide to save them, make sure you buy them, so you can fire the idiots currently running things and hire some competent people, and pocket the future profits.

Hehehe. they have already sent me through college with no debt, and bought me a 2005 Altima, so I can't complain.

Again I am reminded how nice it is to live in a country where an education at the very best university costs about 10 bucks

[Crazed Rabbit]

Absolutely not. The american auto industry is chrashing and burning for a reason, they produce inferior cars nobody wants. if you decide to give them money now, you'll just face the exact same situation in a few years.

And because they caved in like sissies to their unions, and are now paying the cost ( about $1500 per car for health care for GM, compared to ~$150 per car for the Japanese companies).

Even buying - nationalizing - these companies won't make them successful, because they operate a fundamentally flawed business models makings cars nobody wants at really high prices because of legacy costs. It'd be like the government buying out kerosene lamp makers after the invention of the lightbulb.

CR

[HoreTore]

It'd be like the government buying out kerosene lamp makers after the invention of the lightbulb.

Then buy their lamps and start making better lightbulbs

[drone]

Respectfully Yours,

Bob Goldthwait, MBA

Loved you in Shakes The Clown.


From what I've heard and read about, one of Detroit's biggest problems (apart from the crappy cars) is the benefits the employees get. How much do corporations pay into the national health care of, say, Japan? Is socialized medicine, in effect, a corporate subsidy?

[Ser Clegane]

Is socialized medicine, in effect, a corporate subsidy?

Not necessarily as one way or the other somebody has to pay for "socialized" healthcare. This might be via the taxes that the companies pay or - like in Germany - they pay their share of the mandatory public health insurance for each individual employee (in Germany employer and employee each pay 50% of the cost of the health insurance).

university costs about 10 bucks

And soon the value of GM stocks will be just enough to pay for that - go figure

[TevashSzat]

No, the biggest problem with the automakers is that worker wages and benefits are way too high compared to those of competitors. Unless the US automakers suddenly rise to the top of the auto industry and drive out the Japanese and Europeans, I see no way for them to compete well unless they address their fundamental problems first

[Louis VI the Fat]

As with so many of America's economic problems, they are the result of the mismanagement of billionaire CEO's and conservative governments, most notably, and starting with, Ronald Reagan.

American cars are and everybody knows it. Poor design, poor quality, unreliable, gas-guzzling. For three decades now, one can buy a Japanese car that costs half the money and is twice as reliable. The workers are there to screw on bolts, so the management alone is responsible for this. However, I never hear them talk about lowering their billionaire wages. Instead, the management whines about unionised wages and pension schemes.

The odd thing about the crisis of the Big Three, is that they are not outcompeted by foreign manufacturers, but by foreign companies operating and manufacturing cars within the US. This is the legacy of Ronald Reagan, the man who together with the billionaire CEO's is responsible for the demise of the Big Three.
When the Japanese first started to outcompete Americn companies, Reagan donned himself in an American flag and urged Americans to 'buy American!!1!'. Patriots bought it hook, line and sinker. This had a devastating impact on the competetiveness of the American automobile industry. It allowed Detroit to stick to their motto 'Small cars mean small profits'.

Worse yet was Reagan's Voluntary Restraint Agreement. This placed 'voluntary' import restrictions on Japanese imports. This had two devastating effects. First, demand for foreign cars kept rising, the supply stayed the same. with absolutely soaring profit margins as a result for foreign companies. The bill was footed by American families. Secondly, if the Japanese couldn't export, they had to manufacture domestically (in the US). This they could easily afford from those huge profits the Voluntary Restraint Agreement allowed them. While Detroit slept, lulled into a false sense of safety by their close alliance with Washington, the Japanese companies ninja'd them and beat them from within.

Currently, most foreign companies operating within the US pay the same union wages and benefits as the American companies do. Yet Toyota produces better cars, with higher profit margins. Their huge lead in design and production has been maintained while Detroit slept, their pockets are much deeper now so they can maintain their lead. And the result of all this we see now.

So I say no bailout. Cars bought in America are still produced in America. So the workers are perfectly secure in their employment. They can simply switch company.
Any bailout therefore is a bailout for the CEO's, the people who destroyed America's industry and who rewarded themselves for it by forever higher, excessive salaries, sometimes into the thousands more than the average manual labourer.